Mortgage Bankers Vs Mortgage Brokers

Many consumers assume that “mortgage companies” are banks that lend their own money. In fact, a company that you deal with may be either a mortgage banker or a mortgage broker. So what is the difference between a mortgage banker and a mortgage broker?

A mortgage banker is a direct lender because it lends you its own money; they may also sometime sell off these mortgages on the secondary market in order to reduce risks. Mortgage bankers are also the ones responsible for servicing your loans once the borrowed money has been disbursed to you.

A mortgage broker is a middleman, just like a real estate agent; he does the loan shopping and analysis for the borrower and puts the lender and borrower together.

Using a mortgage banker does not mean that you can shave off extra closing fees that might be generated from using a middle man, because a mortgage broker often does not charge any fees for his service. A mortgage banker can give you direct loan approval, whereas a broker gives you information second-hand. However, many mortgage banks are limited in what they can offer, which is essentially their own product. In addition, if you present your loan application in a poor light, you’ve already made a bad impression. I am not suggesting you lie or mislead a lender, but understand that presenting a loan to a lender is like presenting your taxes to the IRAS; there are many ways to do it, all of which are valid and legal. Using a mortgage broker allows you to present a loan application to a different lender in a different light.

A mortgage broker may or may not charges a fee for his service, depending on the level and type of service that is required. One big advantage is that he has access to a wide variety of loan programs. He also may have knowledge of how to present your loan application to different lenders for approval. Some mortgage bankers also broker loans. As an real estate investor it is wise to have both a mortgage broker on your team so as to work out different financing solutions, giving you more choices to finance your deal.



Choosing A Lender


Choosing a lender that you want to work with involves several factors, not the least of which is an open mind. You need a lender that can bend the rules a little when you need it and get the job done on a deadline. You need a lender that is large enough to have pull, but small enough to give you personal attention. And, most of all, you need a lender that can deliver what it promises. However do take note that the mortgage banker that is assigned to serve you can make or break a deal. A freshly minted mortgage banker will not have the experience to advise you on more complex type of deals.

1. Length of Time in Business

Since the mortgage brokering business is not highly regulated in most countries; there are a lot of “fly-by-night” operations. Bad news travels faster than good news in business, so bad mortgage brokers don’t last too long. Look for a company that has been in business for a few years.


2. Company Size

A company that is too big can be problematic because of high employee turnaround. That can translate to longer waiting time for your application. If you are dealing with a mortgage broker, it is often a smaller operation. Dealing with a smaller operation may be good in terms of communication if he or she is a “go-getter.” On the other hand, the individual may be hard to get a hold of, since he or she is answering the phone all day.

A small to mid-sized company is a good bet. You will be able to get the banker or broker on the phone, but he or she will have a good support staff to handle the minor details. Also, a mid-sized company may have access to more wholesale lenders than a one-person company.

3. Experience in Investment Properties

It is important to deal with a mortgage broker or banker that has experience with investor loans. Owner-occupant loans are entirely different than investor loans. And, it is important that the broker or lender you are dealing with has a number of different programs. It is often the case that you find out a particular loan program won’t work, in which case you need to switch lenders (or loan programs) in a heartbeat to meet a funding deadline.


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when buying a property nowadays, it is so difficult for buyer:

1) seller not realistic as URA prices reflect valuation price.
2) financing margin is now lower than those days - 80% of purchase price. banks are very selective on its customers

buyer may need to come up with more than 20% of selling price as downpayment if valuation of property is lower.

A lot of viewers but no takers.
e.g. seller wants to sell ardmore II at $2200 psf. best valuation at $1,800psf. Banker only can provide 80% financing of $1800psf= $1440psf

i.e. buyer needs to come up with downpayment of 35% or $760psf.
How to commit if valuation keeps dropping and two months later, when valuation report issued, property valued at $1600psf

that will be disaster..